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The chief executive of high-tech Sun Microsystems Inc. thinks it is high time Web logs-called “blogs”-get their due from the Securities and Exchange Commission by allowing company blog posts to supplant traditional press releases to inform investors. SEC Chairman Christopher Cox responded positively earlier this month to the concept in his own blog-posted response to Sun CEO Jonathan Schwartz. The idea is that companies would use their blogs to disclose material information about the corporation, cutting out the media middleman. Blogs are generally written as running journals in a stream-of-consciousness style that is the verbal opposite of the lawyer-vetted Form 8-K filed with the SEC to disclose company news. It’s enough to give plaintiffs’ lawyers heart palpitations. “Right now, blogs are not considered reliable information; they’re considered gossip mills,” said Reed Kathrein, a securities plaintiffs’ attorney in Lerach Coughlin Stoia Geller Rudman & Robbins’ San Francisco office. He said a real threat is the company use of a blog “to leak information that is not material but will steer the market in a particular direction.” An opening The Internet exchange between Schwartz and Cox provides an opening for re-examination of SEC Regulation FD, which stands for Full Disclosure, outlining the generally accepted means by which companies broadly share material information with the marketplace. The rule, adopted in 2000, approves corporate dissemination of material news through the filing of a Form 8-K with the SEC, or press release through widely disseminated news or wire services, or “any other widely non-exclusionary method . . . designed to provide broad public access.” “To date, the SEC has not taken the position that the regulation’s ‘widespread dissemination’ requirement can be satisfied through disclosure through web-postings alone,” Schwartz wrote to Cox. “We believe that the proliferation of the Internet supports a new policy that online communications fully satisfy Regulation FD’s broad distribution requirement,” he said. Cox responded, “We welcome your offer to further discuss with us your views in this area. Assuming that the Commission were to embrace your suggestion that the ‘widespread dissemination’ requirement of Regulation FD can be satisfied through web disclosure, among the questions that would need to be addressed is whether there exist effective means to guarantee that a corporation uses its website in ways that assure broad non-exclusive access.” Bruce Carton, vice president of Institutional Shareholder Services, who maintains a popular securities blog, said, “I don’t think blogs, including Sun, have enough readership to justify being the place for corporate disclosure.” But Adam Pritchard, securities law professor at the University of Michigan Law School, supports the idea. He suggested that nothing in the rule bars the use of a blog for disclosure now and a company could simply do it. “But if I was the general counsel of the first company that did it I would be uncomfortable,” he said.

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